GATS and Gambling

In 2005, the WTO appellate tribunal handed down a final ruling on the U.S-Gambling case, one of only two cases that have been decided exclusively on the GATS. Because the ruling clarified how the WTO interprets ambiguous GATS language, it is a watershed decision that shows how the tribunal may rule on future GATS cases.

Antigua, which has a significant Internet gambling industry, challenged U.S. remote gambling laws under GATS rules. The WTO decided that U.S. federal, state and local gambling laws and regulations are subject to GATS rules, despite the USTR's stated position that it never intended to commit gambling services. As a result of the WTO ruling, limits on the number of service suppliers (e.g. on the number of casinos), monopolies (e.g. monopolistic state lotteries) and exclusive service provider arrangements (e.g. Indian gaming compacts) are prohibited. The WTO also ruled that regulatory bans are considered a "quota of zero," which would put state bans on gambling at risk for a challenge at the WTO.

In response to this ruling, 29 state attorneys general wrote a letter to the U.S. Trade Representative (USTR) raising serious concerns about the implications of the ruling for state regulation of gambling in particular, and for state regulatory authority in general. Finally in 2007, the Bush administration made an unprecedented decision that it will withdraw the U.S. gambling service sector from World Trade Organization (WTO) jurisdiction. Although this was good news, the fact that this action will trigger major demands by other countries for compensation under WTO rules also highlights how the fast track negotiating system has enabled a series of trade pacts that undermine the public interest.

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